Market cycle
Gone are the days of queues to buy a leaky Wellington home. Now the capital is the epicentre of the housing downturn, writes Miriam Bell.
Wellington house prices have fallen by nearly 20% from the ‘‘ridiculous’’ highs of last year, but the region’s market will be the first to hit its trough, agents say.
At the end of last year, the region’s median price hit a record $1 million, according to the Real Estate Institute. But the market’s trajectory has been downhill from there.
Prices are falling in other regions, but Wellington’s market has had the biggest decline. The institute’s latest figures had its median at $828,000 in October, down 19.7% from the peak.
The region’s price falls are slowing on a monthly basis, new CoreLogic figures suggest.
But they are still outpacing those of other centres, and the region remains the epicentre of the downturn, CoreLogic head of research Nick Goodall says.
Porirua prices were down 4.7% over November, and 8.7% over the quarter to $826,772, and that was the biggest monthly and quarterly declines of any urban area.
Tommy’s Real Estate principal Nicki Cruickshank says the price falls vary across the market.
Prices at the top end are down about 10%, but prices in the $1.1m to $1.5m bracket are down about 25%.
It is not surprising that prices have fallen as they hit ‘‘ridiculous’’ highs last year, which was bad for buyers, and they had to come back, she says
‘‘Real estate moves in cycles, and you have to take the highs with the lows.
‘‘We had an extraordinary high, and now we are having the inevitable low.
‘‘It is a painful adjustment for many sellers, but we are getting there. The market is starting to calm, and we are probably at, or nearing, the lower end of this cycle now.’’
Wellington will be the first region to hit its trough, and once the market does bottom out it will remain stable for the next three to five years, Cruickshank says.
‘‘Even though the market is quieter, we are still doing quite a few sales. We had 65 last month.
It’s just they are at a lower price, and investors are nowhere to be seen.’’
But the buyers who are out there are serious and there are a surprising number of firsttimers in the market. More than half of her agency’s sales are in that bracket, she says.
‘‘Higher interest rates are a concern for many, but they may only be this high for another six months.
‘‘They won’t go back to where they were in 2020 and early last year, but they might settle in the 5% range. The average of the last 20 years is about 7%, so that’s not bad,’’ Cruickshank says.
Wellington was strapped for housing stock for many years, but the number of houses for sale was up by 28.6% annually to 1779 in November, Realestate.co.nz’s latest figures show.
Ray White Wellington City agent Ben Atwill says this makes for more choice for buyers, including first-home buyers.
Twelve months ago, it was scary for buyers as prices rocketed, and people felt they had to borrow any money they could to get into the market, he says.
‘‘Buyers can be more considered these days. They don’t have to rush in to buy whatever they can get as the market is calmer.
‘‘Interest rates are causing some hesitation, but the hike is offset by the drop in prices, and many buyers are more confident because of that reduction.’’
Sellers are the hardest hit by the price drops. Gone are the days when it was possible to put a leaky home on the market and have people queuing to take a look, he says.
‘‘But houses are selling. The high end of the market is moving well, and well-presented properties which are fully insulated, double-glazed with building warranties in place command high interest.’’
‘‘Family-focused suburbs, with community hubs, and transport access, such as Island Bay, Mt Victoria, and Brooklyn, are more resilient.
‘‘Outer-lying suburbs or suburbs away from infrastructure, such as in Lower Hutt, are less resilient.’’
Most sellers understand the frenzy of the 2020 to 2021 boom is over, and that in a down market, such as this one, it is they who have to drive sales, Atwill says.
‘‘There’s lots of doom and gloom about interest rates right now, but remember the 1980s? Interest rates were high then, and people still bought properties. People want to buy and sell, but prices are adjusting.’’
CK & Co Realty managing director Hannah Kilgariff is
based in Lower Hutt, and she says the area has suffered the most in the downturn.
‘‘Prices increased most, and were the quickest to fall. They are down close to 23%. One of our clients was looking to sell for $1.2m in March, and now they are taking offers of around $800,000, for example.’’
Buyers have adjusted and feel that even if prices drop a little more they are OK with that, and they want to lock in rates before they go up more, she says.
‘‘Until the Reserve Bank’s OCR announcement, we were seeing some spring pickup, and first-home buyers are coming back a bit, but there is hesitation, and no-one wants to buy off-the-plan. It’s all about existing houses.’’
Sellers realise this is the new normal, and if they have to sell, then they will do it, but every transaction is hard work, she says.
‘‘A small building issue will be a huge thing for a buyer, and they’ll drive it hard. And the seller will be annoyed they have to sell it for less. Lots of negotiating is involved to get a sale over the line.’’
It is just the tough end of the market cycle, and it means an agent has to take every offer they get, even if it is bad, to a seller, Kilgariff says.
‘‘Having said that, we are bringing offers to sellers that three years ago they would have been keen to sign immediately, but because of the crazy time we had last year they are reluctant.
‘‘Real estate moves in cycles, and you have to take the highs with the lows. We had an extraordinary high, and now we are having the inevitable low.’’ Nicki Cruickshank Tommy’s Real Estate principal
‘‘We are not going to see the likes of that market again in a hurry, so people do need to adjust their expectations. But most will be OK, if they have owned their property for a few years.’’
‘‘There’s lots of doom and gloom about interest rates right now, but remember the 1980s? Interest rates were high then, and people still bought properties.’’ Ben Atwill Ray White Wellington City agent